The Largest MLP IPO of 2014

Earlier this week, Shell Limited Partnership priced one of the largest MLP IPOs of all time, the largest of the decade, and certainly the largest of 2014.

What’s an MLP? It’s a Master Limited Partnership. What’s a Master Limited Partnership? We thought you’d never ask! Ipreo’s Global Markets Intelligence team has you covered.

Master Limited Partnerships are publicly traded limited partnerships that provide issuers – typically hailing from the Midstream industries of the Energy sector – with the tax benefits of an LP and the liquidity of a publicly traded security. In order to qualify for Master Limited Partnership status, the firm must generate at least 90.0% of its income from “qualifying” sources, which are generally recognized as activities pertaining to the production, processing and transport of oil, gas and coal byproducts.

Though heavily weighted towards the Energy industry, issuers from the Financials space (such as REITs) or Utilities sector have also been known to incorporate as a MLP. MLPs are popular amongst investors, as they typically generate yields higher than most benchmark indices thanks in part to quarterly mandated distributions. They also must pay out 90% of their income to investors in the form of dividends and/or other distributions which makes them very popular among investors, as they essentially guarantee returns.

Some quick stats, to shed light on MLPs in general and help explain why Shell’s is noteworthy:

Since 2001, 93 Energy MLP IPOs have priced on US exchanges, earning a combined $26.1 billion in proceeds. However, most of these IPOs have trended to the small-to-medium side, as only 9 of these IPOs have raised more than $500M in proceeds.

MLP IPOs have posted respectable, if not modest, gains out of the starting gate, recording an average offer/1 day return of 6.5%. Extending the lense to an offer/current basis, returns have skyrocketed to an astounding 105.0%.

Leaders from the space include, Sunoco Logistics Partners, which has seen its price rise an incredible 1,306.8% since debuting in 2002. Meanwhile, both Crosstex Energy and Kinder Morgan Management have posted returns of 500.0%+ since debuting in 2004 and 2001, respectively.

Shell must have gotten the memo about the strong demand for MLPs, and the market responded accordingly, with a pricing that exceeded its filed range and showed the largest first day pop – 45.9% – by an MLP since at least 2001.

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